Micatin, Inc.’s comparative income statement follows. The 2017 data are given as needed.

MICATIN INC. Comparative Income Statement Years Ended December 31, 2019, and 2018
Dollars in thousands	2019	2018	2017
Net Sales Revenue	\( 181,000	\) 160,000
Cost of Goods Sold	93,500	86,500
Selling and Administrative Expenses	45,000	40,500
Interest Expense	8,000	12,000
Income Tax Expense	11,000	10,500
Net Income	\( 23,500	\) 10,500
Additional data:
Total Assets	\( 209,000	\) 187,000	\( 167,000
Common Stockholders’ Equity	96,000	91,500	80,500
Preferred Dividends	2,000	2,000	0
Common Shares Outstanding During the Year	15,000	15,000	10,000

Requirements

1. Calculate the profit margin ratio for 2019 and 2018.
2. Calculate the rate of return on total assets for 2019 and 2018.
3. Calculate the asset turnover ratio for 2019 and 2018.
4. Calculate the rate of return on common stockholders’ equity for 2019 and 2018.
5. Calculate the earnings per share for 2019 and 2018.
6. Calculate the 2019 dividend payout on common stock. Assume dividends per share for common stock are equal to \)1.13 per share.
7. Did the company’s operating performance improve or deteriorate during 2019?

The profit margin ratio shows the rate of income that remains after all business expenses have been paid. Formula to calculate the profit margin ratio is as follows:

$\text{Profit\hspace{0.17em}margin\hspace{0.17em}ratio\hspace{0.17em}}=\frac{\text{Net\hspace{0.17em}income}}{\text{Net\hspace{0.17em}sales}}$

2019

$\begin{array}{c}\text{Profit\hspace{0.17em}margin\hspace{0.17em}ratio\hspace{0.17em}}=\frac{\text{Net\hspace{0.17em}income}}{\text{Net\hspace{0.17em}sales}}\\ =\frac{\$23,500}{\$181,000}\\ =0.130\text{\hspace{0.17em}or\hspace{0.17em}}13.0\%\end{array}$

2018

$\begin{array}{c}\text{Profit\hspace{0.17em}margin\hspace{0.17em}ratio\hspace{0.17em}}=\frac{\text{Net\hspace{0.17em}income}}{\text{Net\hspace{0.17em}sales}}\\ =\frac{\$10,500}{\$160,000}\\ =0.066\text{\hspace{0.17em}or\hspace{0.17em}}6.6\%\end{array}$

2019

2018

2019

$\begin{array}{c}\text{Asset\hspace{0.17em}turnover\hspace{0.17em}ratio}=\frac{\text{Net\hspace{0.17em}sales\hspace{0.17em}revenue}}{\text{Average\hspace{0.17em}total\hspace{0.17em}asset}}\\ =\frac{\mathrm{\$}181,000}{\left(\frac{\mathrm{\$}209,000+\mathrm{\$}187,000}{2}\right)}\\ =0.91\text{\hspace{0.17em}times}\end{array}$

2018

2019

2018

$\begin{array}{c}\text{Rate\hspace{0.17em}of\hspace{0.17em}return\hspace{0.17em}on\hspace{0.17em}common\hspace{0.17em}stockholder\hspace{0.17em}equity}=\frac{\text{Net\hspace{0.17em}income}-\text{Preferred\hspace{0.17em}dividend}}{\text{Average\hspace{0.17em}common\hspace{0.17em}stockholder's\hspace{0.17em}equity}}\\ =\frac{\mathrm{\$}10,500-\mathrm{\$}2,000}{\left(\frac{\mathrm{\$}91,500+\mathrm{\$}80,500}{2}\right)}\\ =0.090\text{\hspace{0.17em}or\hspace{0.17em}}9.9\mathrm{\%}\end{array}$

2019

$\begin{array}{c}\text{Earning\hspace{0.17em}per\hspace{0.17em}share}=\frac{\text{Net\hspace{0.17em}income}-\text{Preferred\hspace{0.17em}dividend}}{\text{Weighted\hspace{0.17em}average\hspace{0.17em}number\hspace{0.17em}of\hspace{0.17em}common}}\\ =\frac{\mathrm{\$}23,500-\mathrm{\$}2,000}{15,000\mathrm{shares}}\\ =\mathrm{\$}1.43/\text{share}\end{array}$

2018

$\begin{array}{c}\text{Dividend\hspace{0.17em}payout}=\frac{\text{Annual\hspace{0.17em}dividend\hspace{0.17em}per\hspace{0.17em}share}}{\text{Earning\hspace{0.17em}per\hspace{0.17em}share}}\\ =\frac{\mathrm{\$}1.13\text{\hspace{0.17em}per\hspace{0.17em}share}}{\mathrm{\$}1.43\text{\hspace{0.17em}per\hspace{0.17em}share}}\\ =0.790\text{\hspace{0.17em}or\hspace{0.17em}}79.0\mathrm{\%}\end{array}$

The company’s performance improved during 2019 based on an improvement in all ratios evaluated.